Market Might Still Lack Some Conviction On NSFOCUS Technologies Group Co., Ltd. (SZSE:300369) Even After 31% Share Price Boost

NSFOCUS Technologies Group Co., Ltd. (SZSE:300369) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. Looking further back, the 24% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, NSFOCUS Technologies Group may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 4.1x, considering almost half of all companies in the Software industry in China have P/S ratios greater than 7.9x and even P/S higher than 14x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for NSFOCUS Technologies Group

What Does NSFOCUS Technologies Group's Recent Performance Look Like?

NSFOCUS Technologies Group could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on NSFOCUS Technologies Group.

How Is NSFOCUS Technologies Group's Revenue Growth Trending?

In order to justify its P/S ratio, NSFOCUS Technologies Group would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 29% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 24% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 37% over the next year. That's shaping up to be materially higher than the 28% growth forecast for the broader industry.

With this in consideration, we find it intriguing that NSFOCUS Technologies Group's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does NSFOCUS Technologies Group's P/S Mean For Investors?

NSFOCUS Technologies Group's stock price has surged recently, but its but its P/S still remains modest. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

NSFOCUS Technologies Group's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for NSFOCUS Technologies Group with six simple checks on some of these key factors.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.